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RETAIL BANKING | Cesar Tordesillas, Korea

South Korean regulator probes KEB

South Korea's Financial Services Commission has started an inspection of Korea Exchange Bank as part of a follow-up measure following a sale order.

The financial regulator has just ordered Lone Star to reduce its stake in the KEB to below 10 percent within six months. It also announced plans to push for the dismissal of three board members at the bank, including Paul Yoo, the former head of the U.S. fund's local unit who was found guilty of stock manipulation.

Earlier this week, Financial Supervisory Service Deputy Gov. Kim Young-dae also summoned KEB chief Larry Klane to request the lender voluntarily unseat the cited board members for the sake of its financial health.

FSS inspectors were dispatched to KEB earlier in the day to investigate factors that could mar the lender's financial health.

   The FSS plans to wrap up the probe as soon as possible and send the case to its sanction review committee, which can impose a dismissal suggestion, the highest level of punishment for a financial firm executive.

Given the fact that those under inspection are generally given 10 days prior notice, the agenda is likely to be addressed at the committee's biweekly meeting on Dec. 15. A FSC permission would then be needed for the measure to be finalized.

Meanwhile, South Korea's Supreme Court ordered the heads of the FSC and the FSS to disclose some of the documents that were used to evaluate Lone Star's acquisition of KEB.

Activists and KEB's unionized workers had called for the regulator to unveil related documents, arguing special benefits were granted to the U.S. buyout firm in the process.

KEB's labor union welcomed Thursday's move, demanding regulators open all related information to the public.

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